America's DIY market is $280 billion, with 40,000 retail outlets. The two-step distribution channel represents over 50% of the total sales volume. They distribute it through a lot of retail branches.
The DIY market in the us has two aspects to do with customers: the two-step channel and the mass market. This is fundamental to the study of the American market structure. Two steps, as a producer, sell products to independent sellers and then sell them to local DIY markets and customers. The mass market, basically, is the super big market like Homedeport and Lowes. These two completely different channels have their own characteristics.
In such a market, we need to focus on DIY customers what is the status quo? How does the market design adaptation products for them? What's happening in the market today? According to our last market survey, there are 380 million people in the United States, and 100 million households own their own homes. America's high housing rate has also built a foundation for America's DIY market. Higher income, higher home ownership rate, make the whole DIY market very active. Unfortunately, the housing market was hit hard after the economic crisis of 2007. (note: the crisis that bill lee mentioned was in 2007, and we generally believe that the impact of the crisis on China began in 2008.)
High housing ownership for the middle class requires high labor costs. Because in the United States, it's very expensive to hire someone to do the chores for you, so America is a do-it-yourself paradise. The average American goes to the tool store to buy the product they need, and then repairs and reorganizes the house. Since 2007, the upheaval in American real estate has made americans more focused on small projects, such as repairs and maintenance.
After the crisis, the U.S. industry expects 3% of new homes to generate market growth, which may be more aggressive in 2009, but that's what we hope. Of course, lower home borrowing rates, higher unemployment and a less optimistic view of the economy are making it less and less expensive for customers to spend on renovations. But beyond that, the U.S. market remains a huge growth market. Especially if your product is focused on improving the family, the U.S. will still be a good market.
Let's take a look at the market channel to see how to reach consumers.
Two-step distribution. The two steps involved in the north American hardware retailers association are also called independent retail channels. There are 40,000 stores, and as producers, you have to sell the product to the wholesaler, and then they sell it to the independent retailer, the retailer to the local customer or the market. It takes a lot of time, patience and commitment to get into this market.
American wholesalers have different wholesale models:
Type of cooperation. Some of the wholesalers are members of retailers, such as ASTUREVALUE and DORTBEST, which sell about $3.5 billion a year. They are not chain stores. They are memberships. DORTBEST has more than 4,000 members. These major wholesalers have many branches all over the world, and they have their own procurement centers in China.
Independently owned wholesale channels. OREAL supports 6,000 retail customers with $1 billion in sales. Their buying groups, like PROR or DA, represent regional retailers. They have nine regional retailers, for example, with $1.6 billion in sales and representatives of smaller retailers, with annual sales of $3 billion.
OGAIN also has a lot of business in China, such as in tianjin, where there are some business arrangements.
Wholesalers in the United States have a large number of purchasing specialists, and all of the tools are done by their own buyers. If you want to sell to the United States, be familiar with these buyers. Wholesalers want producers to look for them, not just one product. They want their suppliers to have a full range of product lines, with unique projects designed to appeal to them.
In the United States, there are three main channels for retail sales:
Twenty thousand tool stores, selling $4.5 billion a year. The tool shops are small, with an average operating area ranging from 5,000 square meters to 10,000 square meters, or about $60 per transaction, which focuses on home repair and maintenance.
More than 56,000 family centers. In addition to the tool products, there are also wood and even household appliances, such family centers are generally large stores.
More than 9000 timber shops. These focus on wood products and services, and tend to provide tools to customers.
Independent retailers, tool stores, and family centers all have independent business models to buy goods on their own terms. Usually 60 to 70 percent of the products are purchased from major wholesalers, while others are purchased from other specialized agencies. It is important for Chinese companies to be aware that they will not buy directly from the manufacturer, and all the channels are through wholesalers.
In the United States, quite a few retail shopkeepers own a shop. There are also many retailers who buy some stores, and two or three stores can achieve higher efficiency and profit margins. Some retailers even own more than 100 stores, all locally owned, closely linked to local communities, and some even have hundreds of years of history.
Again, the United States is very good for the segmentation of the distribution channel, a lot of sales representative in the United States to find manufacturers, let others know about your products, maybe you want to advertise products, a detailed marketing, to have a lot of selling points.
It's a very complicated combination, with lots of small clients you have to deal with, and those little opportunities that take a lot of time, patience and effort. But over time, you end up getting paid back.
Let's take a look at the growth of Homedeport and Lowes, the market participants, over the last 25 to 30 years.
The two companies have branches in major U.S. cities, and are well-known U.S. national brands. Both companies have similar marketing strategies, and it is very difficult to work with them, especially if producers want to get in touch with them directly. Homedeport is very demanding and must provide the same quality products and services for each store, and must work very hard to improve the business, otherwise it will not work with them. If you build a partnership with them, it will bring you great benefits and growth. Therefore, for China's tool companies aspiring to break into the us market, must establish a complete product line, the high quality service, long-term focus and professionalism, so that you can be in the us market success.